[Click eStock] "DL E&C, Low PF Risk and Clear Recovery Outlook"

Housing Sales Slowdown, Plant Sales Increase Expected
Second Half Order Plan Set Over 2 Trillion Won
Low PF Risk and Cost Ratio Improvement Anticipated

Daishin Securities analyzed on the 28th that DL E&C lacks momentum for stock price increase but has high valuation merits. They maintained a 'Buy' investment rating and a target price of 50,000 KRW. The previous closing price of DL E&C was 33,450 KRW.

Researcher Lee Taehwan of Daishin Securities said, "(The target price) is the result of applying a target price-to-book ratio (PBR) of 0.43 times to the expected book value per share (BPS) of 115,219 KRW in 2024," adding, "Although it is true that the momentum for stock price increase has been somewhat lacking, the recovery outlook remains clear, and given the high valuation merits, we maintain a preference within the sector."

DL E&C's second-quarter performance is expected to record consolidated sales of 2.11 trillion KRW (a 6.9% increase year-on-year), operating profit of 66.8 billion KRW (a 7.1% decrease year-on-year), and an operating margin of 3.2% (a 0.4 percentage point decrease year-on-year). This is below the market consensus (average forecast).

Housing sales continue to slow due to sluggish construction starts, with the number of housing starts decreasing from 14,345 units in 2021 to 3,601 units in 2023. On the other hand, plant sales are expected to exceed 500 billion KRW per quarter with a 20% increase, driven by the full-scale progress of large projects such as S-Oil Shahin and Russia Baltic. The cost ratio is expected to be similar to that of the first quarter, and sales mix improvement is expected to become prominent in the second half.

Orders are understood to have been sluggish in the second quarter as well as the first quarter, with the progress rate against the plant sector order target being particularly disappointing. There is a plan to secure orders exceeding about 2 trillion KRW in the second half.

Researcher Lee said, "Investment points include lower project financing (PF) risk compared to competitors, expectations for the speed of improvement in housing cost ratio, and sales expansion based on the plant order backlog."